The Importance of Food Costing

With food costs and inflation climbing and customers spending less, restaurant operators must routinely check their menus to ensure they are profitable. One of the greatest weapons against profit loss is to know your food costs.

What is Food Cost?

Food cost determines a restaurant’s profitability. It is what a plate is being sold for on a menu verses what it costs to prepare the plate. Most businesses want their food cost to be at or below 30%.

Why Should I know my Food Cost?

A restaurant’s food cost determines its profitability. Without knowing what the food cost is, there is no way to know if the items on a menu is generating a profit? For example: lets say a menu item is a “slice of apple pie”. In order for the restaurant to meet their 30% food cost goal they would need to know what that slice of pie costs to produce. That slice of pie costs $1.00 to make, so it needs to be sold for at least $4.50 to meet a 30% food cost goal. A restaurant’s food cost covers everything that goes into running the business, from payroll to rent so it is imperative that all menu items meet that threshold.

How do I maintain a low food cost?

To maintain a low food cost a restaurant needs be take be acutely aware of how much inventory they have and how they are using it. According to a Green Restaurant Association analysis “a single restaurant in the U.S. can produce approximately 25,000-75,000 pounds of food waste in a year depending on the size of the establishment”. That is money thrown away.

Unilever Food Solutions’ World Menu Report, Sustainable Kitchens: Reducing Food Waste, noted that reducing food waste provides financial benefits for operators, including a reduction in disposal costs and increased kitchen efficiency. In addition, nearly half of those surveyed in the U.S. say they would spend more for meals at restaurants and food service locations that are taking steps to limit food waste. With 49 percent of American’s food budget being spent in the restaurant community operators and chefs would be wise to take steps to reduce food waste in order attract customers as well as reduce their bottom line.

1. Keep track of your products

It is impossible to run an efficient kitchen if you do not know how much product you have to work with. How much do you have? Are you out of something? Is inventory disappearing? Without keeping track of your products you will be unable to answer these questions and chances are you are loosing money. To avoid this, take stock of your inventory and do it often. The more you know what you have to work with, the less likely you and your staff will be to waste the products that you have.

2.Practice the “Root to Stem” technique

A growing trend in restaurants is the “root to stem” technique of cooking. The high cost of food combined with the growing interest in being “green” has helped “root to stem” cooking grown in popularity. Everyone from the home cook to the restaurant chef is looking for ways to stretch their food dollar and this new way of cooking is all about using every viable resource of a product.

3. Composting

Today, many restaurants are keeping a garden to provide them with fresh produce on a daily basis. There is no better way to maintain a garden than by fertilizing it, and you can turn your food scraps into nutritious food for your garden by composting. Check out Sustainable Foodservice.com to learn about all the different techniques you can use to turn your leftovers into fertilizer.

4. Spend time planning your week.

In order to keep food waste at a minimum it is imperative to plan. By ordering the right amount of product for a set number of dinner services you will be less inclined to waste. Calculate the amount of money you spend on each of your recipes so you can rest easy knowing your dollars are wisely spent and not feeding the trash bin.

5. Consider a creative reconstruction of your menu.

During uncertain economic periods it is imperative that restaurants change with the times. Instead of raising your prices to compensate for that expensive cut of meat, try reworking the recipe to use a less expensive cut, or substitute more produce into the dish. Another great way to save is to incorporate local seasonal produce into your dishes instead of importing expensive out of season fruits and vegetables. Not only will you be satisfying your customer by not raising prices, but your till will be full as well.

With some creative thinking and a little planning it is possible to come up with many solutions to the rising cost of food. By investing in the right tools, planning out your menus, and reworking your dishes it is possible to keep prices down and customers happy.

How do I figure out my food cost?

There are many tools on the market to help calculate food costs.

For example, MenuMax will match the ingredients in your recipes to the items in your order guides and calculate the food cost for that dish, down to the last cent. Knowing the exact cost of an item will let you analyze the inflation cost, set a price that meets margins and satisfies customers.

Over the last year 9,450 restaurants in the U.S. closed. Nearly 92% were independents that did not manage their food costs wisely.

MenuMax arms you with the tools and knowledge you need to engineer a highly

profitable menu. With MenuMax you can manage your profit margins by viewing total recipe cost, single-serving cost, and menu food cost percentage for a higher return on investments.